Tca/902/2017 Of Smt. Hema Harathi v. The Income Tax Officer

IN THE HIGH COURT OF JUDICATURE AT MADRAS DATED : 17.12.2018 CORAM THE HONOURABLE MR.JUSTICE T.S.SIVAGNANAMandTHE HONOURABLE MR.JUSTICE N.SATHISH KUMAR Tax Case (Appeal) No.902 of 2017 Smt.Hema Harathi,Represented by Power of AttorneyHolder Mr.Koka Prabhakar Rao, ... Appellant-vs The Income Tax Officer,Ward - I(2),International Taxation,Chennai - 600 034. ... Respondent Tax Case (Appeal) filed under Section 260-A of the IncomeTax Act, 1961 against the order of the Income Tax AppellateTribunalBench'C',Chennai,dated11.01.2017inITA.No.2922/MDS/2016 for the assessment year 2013-14.and againstthe order of the Commissioner of Income Tax (Appeals)-16,Chennai-34, dt:24/08/2016, made in ITA.No.78/CITCA)-16/2013-14,for the assessment year 2013-14 and against the order of theInocme Tax officer (International Taxcation)-1(2), Chennai-34,dt:29/12/2015, made in Permanent No.AIQPH8226F for theassessment year 2013-14.For Appellant :Mr.R.Sivaraman For Respondent:Mr.S.RajeshSr. Counsel forMr.Karthik Ranganathan JUDGMENT (Judgment was delivered by T.S.Sivagnanam, J.) This appeal filed by the appellant under Section 260A ofthe Income-tax Act, 1961 (hereinafter referred to as "the Act"),is directed against the order of the Income Tax AppellateTribunalBench'C',Chennai,dated11.01.2017inITA.No.2922/MDS/2016 for the assessment year 2013-14. 2.The above appeal has been filed by raising the followingsubstantial question of law:- “Whether on the facts and circumstancesof the case, the Appellate Tribunal was rightin law in denying the claim of appellant u/s.54 of the Act?" 3.Heard Mr.R.Sivaraman, learned counsel appearing for theappellant/assessee and Mr.Karthik Ranganathan, learned SeniorStanding Counsel for the respondent/revenue. 4.The brief facts which are necessary for disposal of theappeal are hereinunder:The assessee is a non-resident and for the assessment year2013-14, she filed return of income dated 12.07.2013 admittingNIL taxable income. The case was selected for scrutiny, theAssessing Officer completed the assessment under Section 143(3)of the Act by order dated 29.12.2015 by assessing the income atRs.70,58,354/- by disallowing the claim for exemption underSection 54 of the Act. The reason for doing so being that theinvestment in the property was made beyond the time limitstipulated in the Act and the date of transfer of the propertywas made only on 15.11.2012 and the same cannot be reckoned as29.08.2012. Against such order, the assessee preferred anappeal before the Commissioner of Income Tax (Appeals) (CITA),Chennai. Before the CITA, the assessee produced the copy of thesale agreement which was not accepted by the Assessing Officerand rejected as an after thought. Accordingly, the CITAconfirmed the order passed by the Assessing Officer. Aggrievedby the same, the assessee preferred an appeal before theTribunal which has dismissed the assessee's appeal by theimpugned order. 5.The assessee's case is that she sold a property forconsideration of Rs.1 Crore and claimed long term capital gainof Rs.71,03,270/- and claimed the entire gain as an exemptionunder Section 54 of the Act. This was rejected by the AssessingOfficer on the ground that there is a dispute in the date ofacquisition of the property. The assessee's case was that the https://hcservices.ecourts.gov.in/hcservices/ date on which possession was handed over has to be reckoned forthe purpose of computing capital gains, whereas the AssessingOfficer took the date of registration of sale deed for thepurpose of examining the claim exemption under Section 54 of theAct. 6.We have perused the impugned order passed by the Tribunaland the documents which are placed before us. 7.The undisputed facts which emerge from the documentsplaced before us are as follows: https://hcservices.ecourts.gov.in/hcservices/ date on which possession was handed over has to be reckoned forthe purpose of computing capital gains, whereas the AssessingOfficer took the date of registration of sale deed for thepurpose of examining the claim exemption under Section 54 of theAct. 6.We have perused the impugned order passed by the Tribunaland the documents which are placed before us. 7.The undisputed facts which emerge from the documentsplaced before us are as follows: The assessee entered into an agreement for sale dated18.09.2012. In this agreement, it has been recorded that thetotal sale consideration of the property is Rs.1 Crore. Theagreement records that the purchaser has paid a sum of Rs.1 lakhby cheque. The Power of Attorney holder of the assessee was oneDr.K.Surekha. Further, the agreement records that a sum ofRs.20 lakhs has been paid by RTGS transfer to the SBI NROaccount of Dr.K.Surekha. The balance amount of Rs.79 lakhs wasagreed to be paid on or before 10.11.2012. The agreement alsocontemplates payment of penalty in the event of default incompleting the sale transaction. Clause 8 of the agreementstates that the vendor and the purchaser agree and undertake tocomplete the sale transactions within the stipulated period andthat the vendor herein has handed over vacant possession of theschedule mentioned property and the original title deeds to thepurchaser on 29.08.2012, the date on which the first advance forthe property was made and agreed to execute/register the saledeeds or the General Power of Attorney or any deed or deedsrequired by the purchaser to and in favour of the purchaser orhis nominee or nominees. In paragraph 7 of the order passed bythe Tribunal, the payments made to the assessee have beenrecorded. From the details mentioned therein, it is clear thata sum of Rs.20 lakhs has been received as sale consideration bymeans of RTGS on 14.09.2012. These payments are not in onelumpsum but split up into various figures amounting to Rs.20lakhs. Further, in the tabulated statement, a sum of Rs.1 lakhhas been shown to have been received by encashment of cheque on20.09.2012. 8.Thus, in our considered view, the payments made on14.09.2012 by RTGS and the cheque which was issued for Rs.1 lakhhas been correctly recorded in the agreement for sale. Apartfrom that, in paragraph 7 of the sale deed dated 15.11.2012registered as Document No.8254 of 2012 on the file of theDistrict Registrar, Madras (South), it has been recorded thatthe original title deeds were handed over to the purchaser andthe purchaser was put in vacant possession of the property on29.08.2012, the date on which the first advance was given by thepurchaser to the vendor. Therefore, in our considered view, the 8.Thus, in our considered view, the payments made on14.09.2012 by RTGS and the cheque which was issued for Rs.1 lakhhas been correctly recorded in the agreement for sale. Apartfrom that, in paragraph 7 of the sale deed dated 15.11.2012registered as Document No.8254 of 2012 on the file of theDistrict Registrar, Madras (South), it has been recorded thatthe original title deeds were handed over to the purchaser andthe purchaser was put in vacant possession of the property on29.08.2012, the date on which the first advance was given by thepurchaser to the vendor. Therefore, in our considered view, the CITA and the Tribunal ought not to have rejected the document asan after thought or disbelieve the claim of the assessee insupport of the plea of exemption under Section 54 of the Act.The CITA had stated that the agreement for sale is an afterthought as it was not produced before the Assessing Officer. Inour considered opinion, the view taken by the CITA is incorrectbecause the assessee has offered an explanation stating thatbefore the assessment proceedings were going on, Dr.K.Surekhadied in a road accident and the assessee came from the foreignCountry, steps were taken by her to search the document whichwas not readily available or traceable and after much effort thedocument was secured and she made a plea to admit the documentas an additional document under Rule 46A of the Income TaxRules, 1962. Therefore, we find that there is no lack ofbonafide or genuinity on the part of the assessee in notproducing the agreement before the Assessing Officer and theexplanation offered appears to be reasonable, fair andwarranting acceptance. Thus, in our considered view in thepeculiar facts and circumstances of the case, we are inclined toaccept the stand taken by the assessee that the date of handingover the possession of the property should be reckoned for allpurposes to sustain the claim for exemption under Section 54 ofthe Act. 9.The decision of the High Court of Karnataka in the case ofCommissioner of Income Tax vs. Sambandam Udaykumar reported in(2012) 19 taxmann.com 17 (kar.) render support to our finding.In the said decision, it was held that once it is demonstratedthat consideration received on transfer of a capital asset hasbeen invested either in purchase or in construction of aresidential house, even though the transactions are not completein all respects as required under law, the same would notdisentitle the assessee from the benefit of exemption underSection 54 of the Act. 10.The decision in the case of Commissioner of Income Tax,Bangalore vs. Mrs.Shakuntala Devi reported in (2016) 75taxmann.com 222 (Karnataka) also comes to the aid of theassessee. In the said case, the assessee sold a flat on04.02.2003 for total consideration of Rs.1.70 Crores and workedout long term capital gains of Rs.1.44 Crores. The assesseetherein claimed exemption undr Section 54 of the Act on theground that she had re-invested the said amount for purchasinganother property by paying advance of Rs.1.66 Crores. Anagreement to purchase the said property was entered on08.09.2003 and between April 2003 to September 2003, a furthersum of Rs.2.40 Crores was paid by the assessee. However, thesale transaction was not concluded nor registration had takenplace and the balance consideration was not paid within twoyears. The Court held that the consideration paid by the assessee under the Memorandum of Understanding dated 08.09.2003would fully cover the consideration of capital gains for beingeligible to claim exemption under Section 54 of the Act. assessee under the Memorandum of Understanding dated 08.09.2003would fully cover the consideration of capital gains for beingeligible to claim exemption under Section 54 of the Act. 11.In the case of Commissioner of Income Tax vs. SardarmalKothari reported in (2008) 302 ITR 286 (Madras), the assesseeclaimed exemption of capital gain tax under Section 54A of theAct. This was rejected by the Assessing Officer on the groundthat the construction was not completed. This order wasconfirmed by the CITA and further confirmed by the Tribunal.The Hon'ble Division Bench held that there is no dispute aboutthe fact that the assessee has invested the entire netconsideration of sale of capital asset in the land itself andsubsequently, the assessees have invested large sums of money inthe construction of the house. The cost of investment in landand the cost of expenditure towards the construction of thehouses was not in dispute. The only ground on which theAssessing Officer had non-suited the assessee for the claim ofexemption was that the houses have not been completed and thereremains some more construction to be made. After consideringthe documents produced by the assessee and noting the fact thatthe assessee had purchased the land by investing the capitalgains and they have also constructed the residential house whichwas established by producing material evidence and based onthose documents held that the requirement of the statutoryprovision has been complied with by the assessee. 12.In the light of the above, we are convinced that on thegiven facts and circumstances, the date of handing over ofvacant possession of the property along with the title deeds tothe purchaser shall be reckoned for all purposes from29.08.2012. Accordingly, the tax case appeal filed by theassessee is allowed and the substantial question of law isanswered in favour of the assessee. No costs. Sd/- Assistant Registrar(CCC) //True Copy// To Sub Assistant Registrar 1.The Income Tax Officer, Ward - I(2), International Taxation, Chennai - 600 034. 2.The Income Tax Appellate Tribunal Bench 'C', Chennai. Chennai. 3.The Commissioner of Income Tax (Appeals),121, Mahatma Gandhi Road, Chennai-34121, Mahatma Gandhi Road, Chennai-34 +1cc to Mr.R.Sivaraman, Advocate, S.R.No.88537 +1cc to Mr.Karthik Ranganathan, Advocate, S.R.No.87784 T.C.(A) No.902 of 2017 MR(CO)GSP(25/01/2019)